FBR ability to achieve Rs2.810tr tax target will determine how much the provinces will receive. CREATIVE COMMONS
The provinces’ share of federal taxes and straight transfers has been increased to Rs1.720 trillion for the new financial year – higher by Rs307 billion or 21.7% over the downward revised estimates for the outgoing year.
However, the looming uncertainty over the Federal Board of Revenue’s ability to achieve the proposed Rs2.810 trillion tax target will determine the actual amount the provinces will get during the course of the fiscal year 2014-15.
The proposed amount of Rs1.720 trillion to be distributed among the provinces is Rs208 billion or 13.8% higher than this year’s original share of Rs1.502 trillion. Due to the anticipated Rs200-billion shortfall in FBR’s tax collection target for this year, the provinces’ share has been drastically cut, adversely affecting their fiscal frameworks. The revised provincial share for the outgoing fiscal year is now Rs1.413 trillion.
Out of the total Rs1.720 trillion, Rs1.580 trillion will be given to the provinces on account of their 57.5% share in federal taxes, known as the federal divisible pool. In the outgoing fiscal year, the revised share of the provinces is Rs1.287 trillion.
Regarding straight transfers, the four provinces will get Rs137.8 billion against the revised estimates of Rs124.3 billion of the outgoing financial year.
The share of the provinces in federal taxes has been determined under the 7th National Finance Commission Award, which came into force in 2010-11. The population remains the single largest criterion to determine the provinces’ respective shares, as 82% of the pool is allocated on the basis of population. The other criteria are poverty and backwardness, which determine 10.2% of the pool. Revenue collection and inverse population density determine 5% and 2.7% of the share, respectively.
According to Finance Minister Ishaq Dar, the increased transfers will help the provinces invest more for the welfare of its people.
For the new fiscal year, FBR’s target has been set at Rs2.810 trillion. Achieving this target, however, will depend on the new government’s will to reform the dysfunctional board, which has been plagued by corruption and nepotism. Even before the budget’s approval by parliament, the FBR has already informed the government that it can collect Rs2.7 trillion at best.
All provinces get more than revised estimates
In the fiscal year 2014-15, Punjab will receive Rs812.7 billion as its share in federal taxes. It is Rs153.8 billion or 22.1% higher than revised estimates. However, as compared to original estimates, the new projection is Rs104 billion or 14.5% higher.
Sindh will get Rs464.1 billion, showing an increase of Rs84 billion or 22.1% over the revised estimates. Compared to the original budget, Sindh will get Rs64 billion or 16% more than this year’s receipts.
Khyber-Pakhtunkhwa’s share for the next year has been set at Rs283.6 billion, which is Rs48.6 billion or 20.6% more than this year’s revised estimates. But it is Rs32.2 billion or 12.7% higher when compared with original budget estimates.
Balochistan will receive Rs159.7 billion next year, which is Rs20.7 billion or 15% up from this year’s revised estimates. There was no major impact of revenue shortfall on Balochistan, as it gets its share on the basis of the original target due to constitutional protection. The original share of Balochistan was Rs142 billion.
Published in The Express Tribune, June 4th, 2014.
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